Canada lands Volkswagen battery factory with billions in subsidies

Volkswagen’s first North American electric vehicle battery plant will be built in Canada, and Prime Minister Justin Trudeau and other Canadian politicians made it clear on Friday that the country had indeed been in a bidding war with the United States. United.

“We’ve put in a lot of money,” Trudeau said at a news conference in St. Thomas, Ont., where six assembly lines covering 370 acres will be built. “Everyone wanted that.”

Volkswagen announced last month that it would set up its first battery plant outside Europe in Canada, but provided few details. On Friday, Canada and the province of Ontario announced they would give the company C$1 billion, or about US$750 million, to build the plant, which will cost a total of C$7 billion. .

A separate deal will provide C$8 billion to C$10 billion in subsidies over the next decade to match the benefits Volkswagen would have received under the Cut Inflation Act had it located the plant in the United States. United. This amount is linked to the production of batteries.

Mr Trudeau, speaking outside a railway museum in front of a steam locomotive and two electric models of Volkswagen, said that while it was impossible for Canada to largely match US industrial subsidies, the agreement with Volkswagen stemmed of a political decision by Canada to strategically challenge its neighbour.

Volkswagen considered a dozen other locations in North America for the plant, which it said would eventually employ 3,000 people and make enough batteries a year for one million vehicles.

“Congratulations from us for outperforming the competition and bringing this gigafactory to St. Thomas,” said Frank Blome, general manager of PowerCo, Volkswagen’s battery subsidiary. “It was not easy.”

The Volkswagen plant will be the second major battery plant in Ontario. Last year, automaker Stellantis and South Korean company LG Energy Solution announced a plant in Windsor, where Stellantis has a large Chrysler-built assembly plant. The plant, which will employ 2,500 people and start production next year, has also received significant government subsidies to cover its C$5 billion cost.

Volkswagen will become the sixth automaker to have major operations in Ontario, Canada’s most populous province, and the first to establish operations there since Honda and Toyota arrived in the 1980s. St. Thomas was once home to a heavy truck factory owned by Daimler of Germany as well as a Ford Motor factory which in its later years assembled cars primarily used as police cars and taxis. Both were closed in 2011 and have not been replaced by other industries.

After the initial announcement last month, Pierre Poilievre, leader of the opposition Conservative Party of Canada, criticized the government for subsidizing Volkswagen.

“This money belongs to Canadians,” he wrote on Twitter. “Not to a foreign company. Not to Justin Trudeau.

But Andreas Schotter, associate professor of international business at Western University in London, Ont., and former chief financial officer of Volkswagen North America, said the subsidies were the reality for countries looking to maintain their auto industries.

“It’s a good thing, but with a high risk,” he said, noting that policy changes, particularly in the United States, could slow the transition to electric vehicles or other technologies. , such as hydrogen fuel cells, could dislodge the batteries over time.

Although St. Thomas, which sits midway between Detroit and Toronto, is at the center of the Canadian automotive corridor, it is a considerable distance from Volkswagen’s North American plants in Tennessee and Mexico. However, it is just down the road from a factory where General Motors recently started building electric delivery vans and a Toyota factory that makes hybrid crossovers.

Over time, Dr. Schotter said, the new plant could end up supplying batteries to other companies.

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